Option Value of Auditing: Evidence from Post-Audit Career Advancement

ABSTRACT

This paper studies the career trajectories of individuals who exit auditing. Using individual-level employment data, I document that ex-auditors transition into a range of positions, especially in accounting and finance, and that ex-auditors who transition into accounting or finance roles are more likely to be promoted than peers in the same roles without an auditing background. These results suggest that auditing experience is not only associated with varied career options but also with advancement in those options. These promotion advantages are more pronounced for ex-auditors who obtained relevant industry or regional exposure through auditing, who were affiliated with Big N audit firms or with audit offices with greater market share or task complexity, who have three to five years of audit tenure, or who transitioned into positions with greater skill overlap with auditing. Together, this paper provides large-sample descriptive evidence that sheds light on the option value of auditing.

Data Availability: Data are available from the commercial data providers identified in the paper.

JEL Classifications: J24; J62; M42.